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3C’s: Recommended Article on the Auto Parts Cartel

Recommended Article on the Auto Parts Cartel

I am passing on this feature article by Dan Gearino of the Columbus Dispatch published on Sunday, March 22, 2015: Massive Price-Fixing Among Auto-Parts Manufacturers Hurt U.S. Car Buyers.The article goes beyond the numbers of the record-breaking prosecutions and looks at some of the reasons the cartel flourished for so long and what the executives were (or weren’t) thinking. First some familiar stats cited in the article:

So far, 33 companies have pleaded guilty and agreed to pay $2.4 billion in fines, and the investigation is ongoing.

In addition to company sanctions, 28 executives pleaded guilty to individual charges and most of them went to federal prison. An additional 26 executives have been indicted but have not surrendered to authorities.

The following quotes are all excerpts from the article:

The prison sentences were a surprise, he said, because many executives considered this conduct to be merely an “administrative offense.”

“Some of the people who (received leniency) were some of the evil, evil people in this thing,” said a midlevel manager for one of the companies that pleaded guilty, a U.S. citizen, speaking on condition of anonymity because he was not authorized to comment.

He described a culture in which decisions were made by Japanese executives, often working with Japanese executives at other companies, and in which competitors were used to working together.

Meanwhile, the many American employees of the companies, even high-level employees, felt shut out from big decisions. In the price-fixing cases, this turned out to be a good thing. All but one of the 54 people charged are Japanese.

“Certainly one of the options we will consider will be extraditing them [indicted foreign defendants] from the country where they are located,” said [Marvin] Price, criminal director of the department’s antitrust division.

There are many lessons to be learned from the auto parts cartel capers. I’ll be writing on some of my thoughts in the future, as I’m sure many others will.